FTC: Current Mortgage Disclosures Inadequate

The FTC issued a press release late yesterday about a recent study by the Bureau of Economics which found that current mortgage disclosure forms do not adequately convey the cost of a mortgage to consumers.

â€œMortgage disclosures designed more than 30 years ago can be confusing even for simple loans, and they do not address the variety and complexity of today's mortgage products,â€? FTC Chairman Deborah Platt Majoras said. â€œAlthough mortgage disclosures, alone, will not prevent deceptive lending practices, consumers who understand mortgage terms and choices are less likely to fall victim to these practices.â€?
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The study's key findings include:

Current disclosures failed to convey key mortgage costs to many consumers, and better disclosures significantly improved this deficiency.

With current disclosures, both prime and subprime borrowers misunderstood key loan terms, and both groups benefitted from better disclosures.

For complex loans, where prime and subprime borrowers had the most difficulty understanding loan terms, better disclosures provided the greatest benefit.

The study was based on 36 in-depth interviews with recent mortgage customers and testing of disclosure forms with 819 mortgage customers.

The full study can be downloaded here. An executive summary is available here.
I'm glad to see this study, as it reinforces that while consumers might know what sort of loan they're getting, they have no idea what that means in most cases. And, for what it's worth, I personally think most GFEs, in their current form, aren't worth the paper they're printed on.

This month inHousingWire magazine

The appraisal industry is in the midst of huge disruption as automated valuation models and hybrid appraisal products gain favor with regulators and investors. What does the future hold for appraisers and appraisal companies as they adjust to the new realities of automation?

Feature

As Millennials grapple with paying off student loans, their opportunity to buy a home gets pushed further and further into the future. That delay has consequences far beyond individual students — the growing student debt crisis impacts every part of the economy.

Commentary

There has been a conscious and rapid shift to broaden the use of alternative valuation products for origination. Not every decision needs a $500, full-blown 1004 interior appraisal. And in some markets where appraisers are short in number, the turn times can stretch from days to weeks. What these new alternative — some would say disruptive — valuation products do is enable lenders and servicers to better match the product to the risk by harnessing big data and technology.